As someone who is trading or looking to trade in the stock market, you must have wondered how intraday trading works and how you can do it. Intraday trading means buying and selling out the shares on the same day to make profits. You do not have to worry about delivery dates, demat, etc. All you need to do is close your open position before the end of the day.
Published on 04 July 2022
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But, intraday trading is not as easy as it seems to be. There are plenty of factors that have to be considered to make profits in intraday trading. In addition, you must understand that intraday trading involves more market volatility than any other investments that you make in the stock market. Therefore, it is essential that you use some successful intraday trading strategies to avoid losing money.
6 Intraday Trading Techniques That You Must Remember
Here is the list of the top day trading techniques that you can use for successful intraday trading:
Understand the day trading techniques
The first thing that you do when you start intraday trading is to research the weaknesses and strengths of the company whose shares you plan to buy. It is also important to assess your risk appetite and invest the amount of money that you are willing to lose.
This is one of the best strategies on the list of successful intraday trading strategies. When you start trading, it is essential that you analyse and study the daily charts. Daily charts are an indicator of the price movements that happen between the closing and opening hours in a session of day trading. The price fluctuations that take place during the medium-term and short-term can be analysed using trading charts. There are many charts that you can analyse, which include five-minute charts, 15-minute charts, tick-tack charts, etc.
Always set a level of stop-loss
Let us understand this with an example.
Imagine that you are an intraday trader, and the stock of ABC Company is trading at a price of ₹450. You are expecting the price to go up today, so you choose to buy 100 shares of the company. Thus, you invest ₹45000 for the shares of the company.
Now, instead of rising, the price ends up falling to 400, and you bear losses of ₹5000(₹50x100 shares).
When you invest in shares, it is quite possible for the price of the shares to rise or fall. It is quite possible that the price of the share you have invested in and you take a long position on falls instead of rising on the day that you are trading.
Therefore, it is essential that you determine the amount of loss that you can bear if the trade goes in the opposite direction of your position. Hence, the best intraday trading strategy is to analyse the intraday calls that provide purchasing and selling recommendations and then set a stop loss.
In the above example, if you would have set a stop loss at 440, the maximum loss would be 1000(₹10x100 shares). Thus, stop-loss helps you manage risk and should be done by every intraday trader.
Understand that investing and intraday trading are different
The fourth successful intraday trading strategy is to understand the difference between intraday trading and investing in the stock market. First, you must understand that these types of trading and investment need different techniques. For example, as an intraday trader, you have to close any open positions on the same day, no matter if the target price has been achieved or not.
But, investments in the stock market need a long-term plan and approach, and these investors are not affected by any short-term market volatility. Also, making an investment in the stock market is more fundamental, whereas intraday trading tends to be more technical. Also Read: What is Fundamental Analysis?
Remember that the stock market is volatile and unpredictable
Before you start intraday trading, it is important to understand that it is highly risky. Even if you consider yourself to be a seasoned trader with the best tools, predicting the movements of the market with absolute certainty is tough.
At some point in time, when the charts indicate a bullish market, the stock prices can go down, resulting in bearish trends in the market. If the movement of the market is opposite to your position, it is essential that you exit your position promptly. This is one of the top day trading techniques that you can use.
Book profits once you reach the target price
Make a note of your entry-level price and the targeted price before you start trading. When you reach the target price, it is advisable to square the position. Do not wait for the price to go up further. This is a trap, and you must avoid it. Make decisions as per the techniques and strategies, not according to how you feel that the performance of the stock will be.
Conclusion
These are the six intraday trading techniques that you can use so that you can maximise your profits. Successful intraday trading includes following the right strategies and techniques and taking charge of your emotions. Once you become a master of the trade, you can consider becoming a full-time day trader.
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A lot of traders and investors, no matter how experienced they may be, fear the market at times, and for a very good reason too! The market is known to fluctuate in a volatile manner, leaving many participants with heavy losses, at least once in a while.
This can sound quite amusing! What are the steps to make profits in intraday trading? There are no set rules for making constant profits, and there are times when we tend to do all the right things, yet we face losses. But intraday trading is all about how you manage the risks and returns by using logic and trading charts.
India Vix Trading: Things that Volatility Index Indicates
Whether you are new to the stock market or have been around for a while, you may have come across several trading tools and indicators. And if you have been trading futures and options, then VIX or the Volatility Index is one such term that most traders and investors are familiar with.
The timing for an intraday trading session on the days when the stock market is open lies between 9:15 am and 3:30 pm.
If the target for the day is not achieved, many traders tend to book the stocks for delivery. But, this might not be the best intraday trading strategy. You must close all your open positions before the stock market closes for the day.
You can maximise your profits from intraday trading if you follow some successful intraday trading strategies. If you use these strategies properly, you will surely make gains.
Related Articles
Volatility Index: What is it and its Impact on Equity Market?
A lot of traders and investors, no matter how experienced they may be, fear the market at times, and for a very good reason too! The market is known to fluctuate in a volatile manner, leaving many participants with heavy losses, at least once in a while.
This can sound quite amusing! What are the steps to make profits in intraday trading? There are no set rules for making constant profits, and there are times when we tend to do all the right things, yet we face losses. But intraday trading is all about how you manage the risks and returns by using logic and trading charts.
India Vix Trading: Things that Volatility Index Indicates
Whether you are new to the stock market or have been around for a while, you may have come across several trading tools and indicators. And if you have been trading futures and options, then VIX or the Volatility Index is one such term that most traders and investors are familiar with.
The timing for an intraday trading session on the days when the stock market is open lies between 9:15 am and 3:30 pm.
If the target for the day is not achieved, many traders tend to book the stocks for delivery. But, this might not be the best intraday trading strategy. You must close all your open positions before the stock market closes for the day.
You can maximise your profits from intraday trading if you follow some successful intraday trading strategies. If you use these strategies properly, you will surely make gains.
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